PennyMac Financial Services, Inc. (NYSE:PFSI) Q4 2022 Earnings Conference Call February 2, 2023 5:30 PM ET

Company Participants

Isaac Garden - Vice President, Investor Relations

David Spector - Chairman & Chief Executive Officer

Doug Jones - President

Dan Perotti - Senior Managing Director & Chief Financial Officer

Isaac Garden

Good afternoon, and welcome to the Fourth Quarter and Full Year 2022 Earnings Discussion for PennyMac Financial Services, Inc. The slides that accompany this discussion are available on PennyMac Financial's website at pfsi.pennymac.com.

Before we begin, let me remind you that our discussion contains forward‐looking statements that are subject to risks identified on Slide 2 that could cause our actual results to differ materially, as well as non-GAAP measures that have been reconciled to their GAAP equivalent in our earnings presentation.

Now I'd like to begin by introducing David Spector, PennyMac Financial's Chairman and Chief Executive Officer who will review the Company's fourth quarter and full-year 2022 results.

David Spector

Thank you, Isaac. In the fourth quarter, PennyMac Financial delivered net income of $38 million, or $0.71 in earnings per share. These results include a non-recurring tax rate change which negatively impacted earnings per share by $0.22. Dan Perotti, PFSI's Senior Managing Director and Chief Financial Officer will provide greater detail later on in this discussion. For the full year, PFSI achieved a return on equity of 14%, driving continued growth in book value per share, which ended 2022 at $69.44.

Our servicing portfolio ended the year at $552 billion in unpaid principal balance as additions from loan production continued to exceed prepayment activity. The growth of our servicing portfolio continues to differentiate PFSI from its competition, serving as an increasingly important asset, which I will discuss later on.

We remained active in stock buybacks and in the fourth quarter we repurchased 1.1 million shares of PFSI common stock at an average price of $46.99 for an approximate cost of $51 million. Repurchase levels were down meaningfully from the third quarter as we prefer to maintain flexibility to address potential risks and opportunities in the evolving market environment.

In PFSI's Investment Management segment, net assets under management were $2 billion at quarter end, down slightly from the prior quarter due to PMT's financial performance.

PFSI's Board of Directors also declared a fourth quarter cash dividend of $0.20 per share. While 2022 was a challenging year for the mortgage industry due to the rapid and significant increase in interest rates, our operating discipline combined with the meaningful actions we took throughout the year to right-size our business for a smaller origination market, led to strong financial performance.